After watching the benchmark S&P 500 index climb by 24% in 2023, investors might assume that all the good stocks are out of their price range. Nothing could be further from reality. Just $100 is more than enough to buy any of the high-yield dividend stocks on this list.
The businesses that underlie these three stocks offer dividend payments that have risen steadily for years. They're also well-positioned to continue raising their payouts in the years to come. Read on to see why they look like smart stocks to buy now for just about any investor who wants to start building a stream of passive income.
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Realty Income
Realty Income (O +0.71%) is one of the largest real estate investment trusts (REITs) that collects rent on commercial property it owns but doesn't operate. As a REIT, it can legally avoid paying income taxes if it distributes nearly all its profits to shareholders as a dividend.
NYSE: O
Key Data Points
At recent prices, Realty Income offers a 5.4% dividend yield, and it sends out payments every month. Last December, the company raised its payout for the 105th consecutive quarter.
The steadily rising cash flows that Realty Income has reported for decades seem likely to continue. The company has tenants sign net leases that transfer all variable costs of building ownership, such as maintenance and taxes, to the tenants. With annual rent raises written into long-term leases, cash flows are highly predictable as long as tenants can make ends meet.
Realty Income's large and diverse portfolio has impressed the credit rating agencies. The REIT boasts an A3 rating from Moody's that allows it to borrow at significantly lower rates than its smaller peers.
Shares of Realty Income have risen since the Federal Open Market Committee indicated potential interest rate cuts in December. Despite the bump, the stock is still trading for around 13.7 times trailing funds from operations (FFO), a proxy for earnings used to evaluate REITs. This valuation is more than fair and makes the stock look like a smart buy right now.
Altria Group
If you think Realty Income has a long dividend-raising track record, wait until you hear about Altria Group (MO +1.22%). Last August, the tobacco giant that markets the leading Marlboro brand in the U.S. raised its dividend for the 58th time in 54 years.
NYSE: MO
Key Data Points
At recent prices, Altria shares offer an eye-popping 9.6% dividend yield. The stock has been under pressure because investors are worried about the proliferation of flavored e-cigarettes that the company can't sell.
The U.S. Food and Drug Administration (FDA) banned the fruity flavors that teens and adults appear to prefer in 2020. Until recently, enforcement of the ban has been weak. From now on, though, popular flavored e-vapor products, such as Elf Bar, could get much harder to find.
Last year, Altria Group acquired NJOY, which is the only pod-based e-cigarette with marketing authorization from the FDA. With help from Altria's highly experienced legal team, NJOY filed suits against 34 manufacturers, distributors, and retailers of illicit e-vapor products last October.
In addition to sweeping litigation to keep illicit vaporizers off the U.S. market, the FDA joined forces with Customs and Border Protection in December. Together, the agencies seized 41 shipments of illegal e-cigarettes.
Altria Group reported adjusted earnings per share that grew 3.3% during the first nine months of 2023. With increasing enforcement of the FDA's flavor ban, NJOY sales could drive even more growth in the years ahead, but the stock price doesn't reflect this opportunity.
Shares of Altria Group have been trading for just 8.2 times trailing earnings. Scooping up some shares at this bargain bin price looks like a relatively safe way to bump up your passive income stream.
Coca-Cola
Coca-Cola (KO +0.19%) is one of the few companies with a longer record of consecutive annual dividend raises than Altria. Last February, the leader in sugary sodas raised its dividend payout for the 61st year in a row.
NYSE: KO
Key Data Points
At recent prices, Coca-Cola offers a 3.1% dividend yield and a very good chance to see more dividend raises in the years ahead. In North America, sugary sodas have been decreasing in popularity for a long time, but the company's well-recognized brands allow it to offset sagging volume with higher prices. During the first nine months of 2023, revenue from North America rose 8% year over year, even though sales volume was flat.
Coca-Cola relies on price hikes to keep North American revenue moving forward, but this isn't the case everywhere. In Latin America, volume rose 7% year over year during the first nine months of 2024. A combination of increasing volume in Latin America and price hikes everywhere pushed total revenue up by 8% over the same time frame.
At recent prices, you can buy Coca-Cola for 24 times trailing earnings. This multiple implies steady growth ahead, but at a slower rate than we've seen. Powerful brands give the company a strong chance to continue growing at a high single-digit percentage in the years ahead. Buying this stock now to hold for the long run looks like a smart move for just about any income-seeking investor.
